At the Berkshire Hathaway Shareholder Meeting, Warren Buffett shared some thoughts on ESG investing. As with questions as to why he didn’t do a big deal during the pandemic, he was somewhat on the defensive. He noted that the Berkshire Hathaway actually controlled the largest value of property, plant and equipment in the S&P 500 and 15% of interstate goods move of their railroads, so had a material role to play in ESG issues.
However, Berkshire’s culture is decidedly anti-bureaucratic. During the pandemic Berkshire has had 12 employees at headquarters. They like to keep it simple. They don’t like sending forms to their companies from Dairy Queen to major railroads, or imposing reporting requirements on them. This includes ESG questionnaires.
They also noted that most ESG request came not from shareholders, but from third party organizations, and, as an organization, Berkshire is more inclined to respond to shareholder needs.
As an example of how he seeks to reduce reporting requirements, Buffett mentioned that he believes he’s the only S&P 500 CEO who doesn’t receive a monthly income statement from his financial team. Doing this reduces the reporting burden on Berkshire’s business units.
Berkshire’s culture is one that avoids reporting for the sake of it, and Buffett believes ESG reporting falls under that umbrella. He also noted that Berkshire does provide substantial disclosure in its shareholder reporting. He doesn’t believe these reports are always fully read before additional questions come in.
That said, Berkshire controls significant energy assets. They mentioned how they are investing tens of billions in high-voltage transmission infrastructure. For example to move renewable electricity from Wyoming to where it is needed in Las Vegas. This is necessary in Berkshire’s view in order to connect renewable generation to the electricity grid. Buffett and his partner, Charlie Munger have also passed on investments in tobacco in the past due to ethical concerns. However, they are comfortable continuing to invest in oil and gas companies such as Chevron.
Charlie Munger, ever the skeptic, also questioned whether anyone knew what the right answer was on global warming. Buffett and Munger as the stewards of Berkshire Hathaway have been extremely successful but they certainly aren’t leading the charge on ESG investing and disclosure.
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